Best Practices Consortium Supply Chain Best Practices Consortium Distribution Center Labor Management Executive Seminar Track 2, Session D September, 2006

Scope This session covers key aspects of labor management, provides insightful benchmark data from other distribution center (DC) operations, and discusses best practices that can be implemented. Labor Retention: What drives turnover and how are companies working to keep staff? Training: What level of training is being provided and is it focused in the right areas? Labor Standards: How are standards being set, how often are they updated, and how are they monitored? Labor Management Systems: What options exist to track labor and performance?

How Well Are We Doing? Overall, how do your DC operations compare to similar operations in other companies? Everyone in the study is at least average or better in all categories against everyone else. We tend to think we are doing better than we really are against our competition.

Labor Turnover Termination for poor performance, skills and attendance accounts for only 29% of overall industry turnover. Only 22% is due to resignation based on complaints about working conditions and pay across industry.

Training For Operators Only 35% of organizations felt that their procedures were consistent within a functional area, and only 15% felt that their procedures were consistent within their DCs. 65% of all staffing is perceived to be cross trained and to spend 19% of their time performing functions outside their standard job duties. Only 11.3 hours per year are spent on average by companies re-training existing staff on their job skills and equipment skills.

Labor Standards Projected initiatives and trends The majority of labor standards focus on individual versus team performance, and 73% of retail companies base part of compensation on productivity.

Labor Standards Projected initiatives and trends The majority of operations are updating labor standards annually or only during operational reviews.

Based upon a scale of 1 to 5 with 5 being the most important Labor Standards Most operations depend on time studies and historical data to establish standards. Based upon a scale of 1 to 5 with 5 being the most important

Labor Standards Most companies have applied labor standards to the job functions with the most labor and most consistent requirements.

Your Expectations for this Session What would you like to discuss? What would you like to learn from this session? How do you attract and find quality new hires? What have others found to be successful in maintaining staff? Is upfront training more or less valuable than ongoing training? How do you achieve the productivity goals established in your operations and then continue to improve? How do you fairly and accurately track performance in real time? Other?

Potential Discussion Points What are some innovative ways to reduce turnover that others have tried? Were these successful? What is the best way to get new hires up to production standards? How long should the ramp-up period last? Do all incentive programs produce payback? What are some that have worked well for all? What areas should you focus on in training? Who should attend? Are your standard operating procedures (SOPs) accurate? Who should update them? Should they be included in ongoing training, or how should they be focused

Potential Discussion Points (continued) How do you get your associates to follow SOPs consistently? How can you modify their behaviors? What are some of the best ways to maximize labor productivity? What is the difference between best practices and best methods and how effective is each? For which job functions have others calculated labor standards? What methods have been successful in tracking them effectively and in enforcing them? Is a labor reporting system or labor management system the solution for your operation? What is your plan to ensure that all associates are progressing towards productivity goals?

Important Takeaways While there are many interesting discussion points, opinions and practices on managing labor, some of the most important in Benchmarking & Best Practices are: Good Labor is critical to success – Having a well-trained and experienced workforce allows your operations to achieve productivity goals, high levels of accuracy, and be adaptable to unexpected demands. Motivation has many faces – Understanding what your associates need to be happy and motivated. It requires providing multiple incentives—including monetary, recognition, job security, growth opportunities and benefits—as well as good leadership, to set expectations and provide the proper tools to perform. Lighten the load – Adding technology, replacing outdated equipment, and managing the operation to minimize associates’ efforts are excellent ways to motivate and make for good labor management.

Important Takeaways (continued) Doing it the best way versus experience and history – Believing that the best method is the one practiced by the most experienced operators is a mistake many people make. Habits and processes developed 5-10 years prior have likely never changed, and your business requirements and strategy have likely changed several times over. Standards are great if you can measure them fairly – Developing performance standards is critical, but being able to accurately track them back to individual performance is where the value lies. The more accurate the information, the better the incentive program for outstanding performance will be for all.

Questions?

Benchmarking & Best Practices References Information on DC labor management can be found in the following references: Reports and Analysis Analytical Reports DC configuration and Basic Operations DC Operations Overview Warehouse Management Systems Executive Seminar Presentations Distribution Center Configurations and Trends Distribution Center Operations Practices Distribution Center Slot Management Practices Distribution Center Labor Management Distribution Center Costs and Performance Metrics Warehouse Management Systems - Current Practice and Trends Outsourced Distribution Center Operations and Value Added Services Note: Available for downloading at www.supplychainconsortium.com